Google hit with record-breaking fine

The EU hit Google with its biggest ever fine, imposing a €4.34bil (RM20.55bil) penalty on the US tech giant for illegally abusing the dominance of its operating system for mobile devices.

Brussels accused Google of using the Android system’s near-stranglehold on smartphones and tablets to promote the use of its own Google search engine and shut out rivals.

The decision, which follows a three-year EU investigation, comes as fears of a transatlantic trade war mount because of US President Donald Trump’s decision to impose tariffs on European steel and aluminium exports.

“Google has engaged in illegal practices to cement its dominant market position in Internet search,” EU Competition Commissioner Margrethe Vestager said as she announced the huge fine.

The new sanction nearly doubles the previous record EU antitrust fine of €2.4bil (RM11.4bil), which also targeted Google because of the Silicon Valley titan’s shopping comparison service in 2017.

Denmark’s Vestager ordered Google to “put an effective end to this conduct within 90 days or face penalty payments” of up to 5% of its average daily turnover.

The Google decision comes just one week before European Commission chief Jean-Claude Juncker is due to travel to the United States for crucial talks with Trump on the tariffs dispute and other issues.

But Vestager – who was reportedly dubbed by Trump the “tax lady” who “hates the US” after she took on a string of Silicon Valley giants – insisted that she was not anti-American.

“I very much like the US ... but the fact is that this (case) has nothing to do with how I feel,” she said.

Google chief Sundar Pichai immediately said the firm would appeal.

“Today’s decision rejects the business model that supports Android, which has created more choice for everyone, not less. We intend to appeal,” Pichai said in a blog post.

Google provides Android free to smartphone manufacturers and generates most of its revenue from selling advertisements that appear along with search results.

The EU says Android is used on around 80% of mobile devices, both in Europe and worldwide.

But Vestager said Google had shut out rivals by forcing major phone makers, including South Korea’s Samsung and China’s Huawei to pre-install its search engine and Chrome browser.

They were also made to set Google Search as the default, as a condition of licensing some Google apps.

As a result, Google Search and Chrome are pre-installed on the “significant majority” of devices sold in the EU, the European Commission says.

Google also prevented manufacturers from selling smartphones that run on rival operating systems based on the Android open-source code, it said.

In addition, Google gave “financial incentives” to manufacturers and mobile network operators if they pre-installed Google Search on their devices, the commission said.

Under EU rules Google could have been fined up to 10% of parent company Alphabet’s annual revenue, which hit US$110.9bil (RM450.5 bil) in 2017.

Reaction from the industry was mixed. The Washington-based Computer and Communications Industry Association said the EU decision was “problematic”, adding: “In this case it is clear that Android has brought more competition.”

Shareholders hardly flinched, with shares in Alphabet dipping 0.7% before nearly erasing all their losses.

Silicon scalps

Vestager’s campaign against Silicon Valley giants in her four years as the 28-nation European Union’s competition commissioner has won praise in Europe but angered Washington.

Brussels has repeatedly targeted Google over the past decade amid concerns about the Silicon Valley giant’s dominance of Internet searching across Europe, where it commands about 90% of the market.

As well as the Android and Google Shopping files, a third investigation is under way, into Google’s AdSense advert-placing business.

Vestager’s other major scalps include Amazon and Apple.

The EU ordered Apple in 2016 to pay Ireland €13bil (RM61.6bil) in back taxes that the maker of iPhones and iPads had avoided through a tax deal with Dublin.

It has also taken on Facebook over privacy issues after it admitted that millions of users may have had their data hijacked by British consultancy firm Cambridge Analytica, which was working for Trump’s 2016 election campaign.

But Brussels has had US tech giants in its sights for a decade and a half, having imposed a huge €497mil (RM2bil) fine on Microsoft in 2004 for anti-competitive behaviour and ruled it must make changes to its Windows system.

Vestager played down the likelihood that the Google announcement would have any impact on Juncker’s talks with Trump, saying that “it will never be the right timing”.